Traders work on the floor of the New York Stock Exchange.
Brendan McDiarmid | Reuters
The 10-year Treasury yield rose on Wednesday as investors digested the impact of April’s better-than-expected wholesale prices.
The yield on the 10-year Treasury note, a key measure of U.S. government borrowing, most recently rose less than 1 basis point to 4.473%. The index rose as much as 3 basis points to hit a high of 4.49%, its highest level since July 17th.
The yield on the two-year Treasury note, which is more closely tied to the Federal Reserve’s short-term interest rate policy, fell more than a basis point to 3.981%. The yield on the 30-year government bond rose more than 1 basis point to 5.042%. It had previously risen 2 basis points to 5.05%, the highest level since July 17.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The producer price index rose a seasonally adjusted 1.4% that month, well above the Dow Jones consensus estimate for a 0.5% rise and the upwardly revised 0.7% rise in March. This was the largest monthly increase since March 2022.
On an annual basis, the index rose 6%, the largest increase since December 2022.
“With energy being perhaps the most important input cost, PPI rose significantly on Wednesday as producers are feeling the ripple effects of $100 per barrel oil and production costs are rising across the board,” said Clark Bellin, president and chief investment officer of Bellwether Wealth.
The U.S. Bureau of Labor Statistics reported Tuesday that consumer prices (not seasonally adjusted) rose at an annual rate of 3.8% in April, the highest level since May 2023. This was higher than the 3.7% year-on-year inflation rate expected by economists surveyed by Dow Jones. Annual core inflation, which excludes food and energy, rose 2.8%, also higher than economists’ expectations of 2.7%.
By any measure, inflation is well above the central bank’s 2% target, which the Fed aims to achieve its goal of ensuring price stability in the economy.
High levels of inflation could complicate the Fed’s future policy.
“As the labor market slows, the Fed has an inflation problem that makes its job even more difficult, especially since the central bank is set to have a new chair in the very near future,” Belin said.
— CNBC’s Lisa Kailai Han also contributed to this report.
